Thursday, February 4, 2010

But they've already GOT the capital, Bill!!!!

I don't have the video yet, but PIMCO's Bill Gross, the aww-shucks normal guy who some suspect of sneakily crafting our bailouts was just on CNBC saying that "the ideal...would be to recapitalize these banks to the point that they have so much capital they can't possibly put our economy at risk."This is the biggest joke of ANY part of the bank bailout process. Bill is suggesting that banks raise equity capital, whether on their own or under threat from the government, to cushion against future losses that could endanger the financial system. The simple solution is to let losses destroy not just EQUITY capital, but the BONDHOLDERS' portion of the capital structure, since they're speculators too!Every time the taxpayer is put at risk, or shareholders are diluted to raise additional capital, it is to make whole the portfolios of people like Bill Gross and his Total Return Bond Fund, which is the largest fund on the planet.The fund's entire holdings are here, but you'll have to skip through over 155 pages of mortgage securities (yep, also propped up by the taxpayer!) to get to corporate holdings like these, whose values jumped massively when the taxpayer jumped in to save the bondholders: